U.S. Ambassador to Iraq Alina Romanowski’s Remarks
Virtual Roundtable Discussion with the U.S.-Iraq Business Council
January 31, 2023
I am pleased to meet with members of the U.S.-Iraq Business Council. You represent some of the finest companies in the United States, and some of you know Iraq very well.
Let me begin by providing a brief overview of where things stand in the U.S.-Iraq bilateral relationship. In short, we are committed to the relationship for the long term. Iraq plays an important and strategic role in the region. We are closely engaged with the new Iraqi government and the Iraqi people in our mutual desire to see a democratic, peaceful Iraq that is stable, secure, and sovereign.
An important part of our work is to facilitate trade and investment in Iraq and thus promote Iraq’s growth. While Iraq’s investment climate has its challenges, there are some positive trends. An estimated 60 percent of the population is younger than 25 years of age, and the Iraqi youth are Iraq’s most valuable resource for building a prosperous, inclusive Iraq. Now that a new government is in place under the leadership of Prime Minister Sudani, we are working with Iraq’s leaders on a range of common goals, with economic and commercial issues taking a prominent place in our agenda.
In my meetings with Iraq’s new leaders, I have emphasized that the Iraqi government must respond to the legitimate demands of the Iraqi people. I have also assured Prime Minister Sudani of our readiness to collaborate with his government on a whole range of shared interests. We have further demonstrated our willingness to work with the Sudani government with the recent visit of National Security Coordinator for the Middle East and North Africa Brett McGurk and Special Presidential Coordinator for Global Infrastructure and Energy Security Amos Hochstein, who met with Prime Minister Sudani and other Iraqi leaders in Baghdad and Erbil in January. The prime minister made it clear that our goals and his significantly overlap.
We are currently working with the Iraqi government to finalize plans for a visit to Washington in early February by a delegation led by Deputy Prime Minister and Foreign Minister Fuad Hussein. In planning the delegation’s visit – and in our bilateral relations in general – we are increasing our focus on issues such as economic cooperation and climate change.
The Iraqi people look to their government to provide greater economic opportunity, and it is important for the Sudani government to make the promotion of diverse economic growth a priority. Economic and regulatory reform is needed to rebalance the economy from its reliance on oil, to deal with chronic shortages in electricity, and to address climate change. We firmly support Iraqi efforts in these areas and strongly encourage the Iraqi government to partner with U.S. companies – with their tremendous expertise, capacity, and experience – in meeting these energy and environmental challenges. We know that strengthening the investment climate is crucial to attracting U.S. and other foreign investment in these areas, and we engage with our Iraqi partners on this issue as well.
The American Heritage organization, which is close to the White House, revealed today, Wednesday, that the demands of the Iraqi delegation, which is currently visiting Washington, headed by Foreign Minister Fuad Hussein, have declined, from “obtaining an exemption period from the restrictions” to “temporarily reducing them.”
The organization said, through a report translated by (Baghdad Today), that the Iraqi delegation, after facing its requests for a period of exemption from US restrictions on the transfer of dollars to Iraq, retracted its previous demands and moved towards demanding a “relaxation” of the current restrictions, instead of canceling them temporarily.
The organization called on US President Joe Biden to “politely reject” all the demands of the Iraqi delegation, stressing that the banking system in Iraq is “completely corrupt and directly harms the interests of the Iraqi and American people,” as described.
She pointed out that the Iraqi authorities obtained twenty years of complete exemption from restrictions, describing it as sufficient time to adapt to the world order, from which Iraq is still outside, “according to the report.”
Baghdad – Mawazine News Deputy Prime Minister and Foreign Minister Fuad Hussein invited the United States Agency for International Development to participate in the climate conference to be held in Basra next March. A statement by the Foreign Ministry received / Mawazine News / a copy of it, said that “the United States Agency for International Development (USAID) hosted Deputy Prime Minister and Minister of Foreign Affairs Fuad Hussein and his accompanying delegation, and the minister gave a briefing during the meeting on the strong relationship between the agency with Iraq for twenty years, and its projects that contributed to providing support to He added, “The two sides also discussed the most important environmental challenges in Iraq and the proposals that can be implemented with the IAEA. The two sides discussed the extent to provide support for the development of the private sector in Iraq and reaching effective mechanisms to implement the agreed policies. The two sides also agreed to continue meetings and joint coordination, put forward future plans for the agency’s work in Iraq, In turn, the Director of the Agency, Samantha Power, reviewed the plans and efforts on which the Agency is working on, which are in the interest of the Iraqi people and the development of the relationship with the United States. They also reviewed the plans of the Iraqi government in the field of providing the best services and looking forward to a better future for the relationship between the two countries by encouraging investment in various Iraqi sectors, adding that the Agency can also provide support in the field of environment through many American subsidiary institutions. In conclusion, the minister invited the agency to participate in the climate conference to be held in Basra next March. Finished29/h
The United States welcomed the efforts of the Iraqi government in the area of economic reforms, monetary policy reforms, modernization of the banking and financial sector, and the fight against corruption.
A joint statement by the governments of the two countries, on Wednesday, after the meeting of the US-Iraqi Supreme Coordination Committee in Washington, said that the meeting discussed the challenges facing the Iraqi economy, including parallel exchange markets. “Conformity of views on the importance of energy independence to protect Iraq’s sovereignty,” the committee stressed.
The statement said that the US delegation renewed its support for Iraq’s ongoing efforts in implementing international standards to protect the banking system from financial crimes, money laundering and terrorist financing. The two sides also affirmed their determination to continue working together “to modernize the financial system in Iraq, in order to improve the conditions of the Iraqi people.”
The United States welcomed “positive developments” in relations between the federal government in Baghdad and the Kurdistan Regional Government, and negotiations on the 2023 federal budget, according to the statement.
Independent / – The specialist in the financial sector, Raghad Nabil Al-Alusi, stressed the importance of instifying the financial sector, by adopting the best advanced technologies.
Al-Alusi added that Iraq has a large banking system and is in continuous growth, which necessitates the existence of advanced technologies commensurate with what the world is witnessing, and that we adopt a plan that promotes performance and raises it to the world gradually.
She pointed out that upgrading to the global services represents an important incentive for international companies that want to enter the Iraqi labor market, which represents their future ambition, which leads us to adopt the best strategies that promote the banking system prepared by the Central Bank of Iraq.
It is worth mentioning that the banking system consists of public and private sector banks, which exceeded 70 banks in various disciplines.
Twilight News / The Iraqi and US governments issued, on Wednesday, a joint statement of the US-Iraqi Supreme Coordination Committee, which included a number of agreements and understandings.
The statement, which was received by Shafaq News Agency, said that “Iraqi Deputy Prime Minister and Foreign Minister Fuad Hussein headed the delegation of the Republic of Iraq, and US Secretary of State Anthony J. Blinken, the delegation of the United States, is a meeting of the Higher Coordination Committee, in accordance with the 2008 Strategic Framework Agreement on the Friendship and Cooperation Relationship between the United States of America and the Republic of Iraq.
The two delegations renewed their determination to deepen the strategic relationship between the two countries through a full range of bilateral issues, for the national interests of each of the two countries, and their common interests in regional stability. The statement pointed out that “this meeting is the first meeting of the Supreme Coordination Committee focusing on economic cooperation, energy sector development, and climate change, which is a sign of a mature strategic partnership under the Strategic Framework Agreement. The Iraqi delegation included high-level representatives from the House of Representatives, the Central Bank, the Ministry of Foreign Affairs, the Ministry of Oil, the Ministry of Planning, the Ministry of Finance, the Ministry of Electricity, the Prime Minister’s Office, Iraq’s Climate Envoy, and the Kurdistan Regional Government.
The U.S. delegation, along with the State Department, included USAID President Samantha Power, Special Presidential Climate Change Envoy John Kerry, Deputy Treasury Secretary Wali Adimo, Special Presidential Coordinator for Global Energy and Infrastructure Amos Hochstein, Global Anti-Corruption Coordinator Richard Nephew, Middle East National Security Council Coordinator Brett McGurk, and senior officials from the State Department, Treasury, Energy, and Commerce.
The two sides discussed the challenges facing the Iraqi economy, including parallel exchange rate markets. The United States welcomed the Iraqi government’s efforts to enact economic reforms, as well as monetary policy reforms, modernizing the banking and financial sector, combating corruption, and preventing manipulation of the financial system—actions that would help boost Iraq’s economic prospects, including strengthening financial and exchange markets.
The US delegation renewed its support for Iraq’s ongoing efforts to build technical capabilities and implement international standards to protect the banking system from financial crimes, money laundering and terrorist financing.
The two sides also affirmed their determination to continue working together to modernize the financial system in Iraq in order to improve the conditions of the Iraqi people. The U.S. and Iraqi delegations reiterated the same views that pursuing an ambitious energy independence agenda is essential to maximize Iraq’s economic prosperity and protect its sovereignty.
The two delegations agreed that Iraq has a historic opportunity to invest in energy infrastructure initiatives designed to improve electricity services to the Iraqi people, secure energy self-sufficiency for Iraq, and mitigate environmental damage to both the global climate and Iraqi public health.
To this end, the two sides decided to accelerate efforts to capture burning gas, modernize the natural gas distribution infrastructure, reduce methane leakage, regional connectivity to the Iraqi electricity grid, modernize Iraq’s electricity infrastructure, and explore renewable energy opportunities. The US delegation praised Iraq’s commitment to regional electrical interconnection projects with Jordan, Saudi Arabia and the GCC Electricity Interconnection Authority.
The two countries stressed the importance of combating and adapting to climate change. The Iraqi delegation reviewed that Iraq will soon publish a comprehensive government strategy to confront climate change. The two sides also affirmed their commitment to accelerate the implementation of burning gas capture projects to achieve the elimination of conventional burning of gas by 2030, to achieve the global pledge on methane. The United States reviewed its plan to expand
Discussions also stressed the importance of the need for ambitious solar farm projects and the establishment of a regulatory framework to attract investment in renewable energy. The two sides also discussed the water crisis in Iraq, and the United States expressed its intention to continue its technical assistance to improve water management practices in Iraq.
The United States called on Iraq to nominate experts in water management to participate in exchange programs with US leaders in this field, and the two delegations stressed the importance of benefiting from modern technologies in groundwater management and irrigation efficiency.
The United States welcomed positive developments in relations between the Federal Government of Iraq and the Kurdistan Regional Government and ongoing negotiations on the 2023 federal budget and hydrocarbon law. The United States assured the Iraqi delegation that the US private sector is the best in technology and its unique ability to meet Iraq’s energy challenges.
The Iraqi-American Business Council also hosted a roundtable for the Iraqi delegation with 40 American companies, and industry leaders who are experts in the field of gas capture, modernization of electricity infrastructure, and renewable energy sources.
After the event, the Chamber of Commerce announced that it would lead two U.S. trade missions to Iraq in June to explore investment opportunities. In addition, the two delegations indicated the intention of the Office of the Trade Representative of the United States and the Iraqi Ministry of Commerce to begin planning for the meeting of the Trade and Investment Framework Agreement Council in 2023.
This agreement between the United States and Iraq serves as a forum to resolve trade obstacles and promote investment and bilateral trade opportunities between the two countries.
The US delegation announced that the US embassy in Baghdad has gradually begun providing visa services to non-immigrants.
The United States and Iraq confirmed that they plan to hold meetings of the Joint Coordinating Committees under the Strategic Framework Agreement, additional meetings of the Higher Coordination Committee, to follow up on investments in energy and the economy, and the climate discussions held during these meetings of the Higher Coordination Committee.
The US and Iraqi delegations affirmed their determination to strengthen the strategic relationship between the two countries.
Baghdad – Mawazine News The head of the victory coalition, Haider al-Abadi, discussed with the Ambassador of the United States of America to Iraq, Alina Romansky, on Wednesday, the financial situation and Iraqi-American coordination on the dollar file. The media office of the head of the victory coalition said in a statement received by Mawazine News a copy of it, that “the head of the victory coalition, Haider al-Abadi, received in his office the Ambassador of the United States of America to Iraq, Alina Romansky and her accompanying delegation.” The statement added that “the meeting discussed enhancing cooperation between the two countries in various fields, and the many challenges that Iraq is going through that require the development of appropriate solutions, as well as the financial situation and Iraqi-American coordination with regard to the dollar, the government’s procedures regarding this file, and the results of the visit of the Iraqi delegation to Washington.” He pointed out that “the importance of uniting everyone’s efforts to develop plans to confront many accumulations, and that the next stage is reform, combating corruption and providing international support to Iraq in these files was stressed.”
Baghdad – Mawazine News Foreign Minister Fouad Hussein confirmed on Wednesday that Iraq adopts the principle of balance in its relations with neighboring countries and the region.
“Deputy Prime Minister and Minister of State Fouad Hussein, and his accompanying delegation met during two separate meetings at the US Congress building with the Chairman of the Middle East Subcommittee on the Foreign Relations Committee, Democratic Senator Christopher Murphy, and a member of the Finance Committee, Republican Senator Todd Yunke, and the Minister also met with Senator Chris Van Hollen, member of the
The minister presented “a review of the current visit to Washington and its importance of opening the horizons of economic cooperation with Washington and the achievements of the current meetings, as the focus was on strengthening the bonds of cooperation in the field of energy, investment and trade, and the support of the United States for Iraq in building a strong economy and developing the monetary and banking system of Iraq, expressing Iraq’
Hussein disclosed that “Iraq’s current efforts in achieving stability for the region and adopting the principle of balance in relations with neighboring countries and the region and establishing the best relations on the basis of preserving Iraq’s interests first, as Iraq has historical relations with neighboring countries, but the basis for dealing in the existing relationship with them remains based on respect for sovereignty, non-interference in internal affairs and the independence of Iraqi decision-making.”
He stressed, “Iraq’s efforts in the field of energy, enhancing resources, and discussing ways to contract with foreign and American companies in particular for investment opportunities available in various sectors. He also provided a summary of the efforts of the Iraqi government to combat corruption and legislative procedures for enact the oil and gas law and focus on providing the best services to citizens, developing the energy sector, and developing and
For their part, “senators stressed during the meetings their welcome to Iraq’s role in the region and its balanced relations with neighboring countries and the region, stressing their keenness to achieve the best relations with Iraq, while noting “supporting Iraq’s efforts with the Treasury Department and other relevant parties to develop the Iraqi economy, monetary and financial policy and the banking sector.”
The financial adviser to the Prime Minister determined the appearance of Mohammed Saleh, on Wednesday, the total public debt of Iraq, while noting that debt amortization and repayment are subject to a tight financial program and regular timings.
Saleh told the official news agency that “the internal debts of Iraq, which is held exclusively by the government banking system, are estimated at about 55 billion dollars if it is valued in foreign currency according to the new exchange rate,” noting that “at least 63% of the internal public debt held by the Central Bank of Iraq, whether in the form of government bonds or treasury transfers.”
He added that “the average annual interest on them all is about 3% with supply,” pointing out that “the external public debt payable between the years 2023-2028 is estimated at 21-23 billion dollars, which means that the total internal and external indebtedness is $76 billion.”
He pointed out that “the total balance of public debt (internal and external) still does not exceed 35% of Iraq’s GDP, while the international benchmark ratios allow for up to 60% and consider it stable.”
He continued, “Based on the rules of discipline or financial strengthening, fiscal policy should reduce the total amount of public debt annually, as well as gradually reduce the annual deficit ratio through the good management of public spending and maximize total public revenues, especially non-oil revenues, which should become about 20% of total public revenues in the budget instead of the current percentages, which do not exceed
He noted that “debt amortization and repayment are subject to a tight financial program and regular timings, especially external debt dues through allocations allocated in the general budget for debt amortization and services, which continues to indicate Iraq’s high creditworthiness with international credit rating institutions and according to their periodically issued data since its adoption in 2015 until the present.”
Al-Sudani adviser reveals the size of Iraq’s internal and external debt
Bilal Wahab is a Sorev Fellow at The Washington Institute.
Articles and testimony
Baghdad’s legal gains won’t mean much if it mishandled political goals, angered Turkey, and further damaged Iraq’s reputation as a reliable oil partner.
The recent rulings of Iraq’s Federal Supreme Court and another imminent ruling by the International Court of Arbitration will certainly strengthen Baghdad’s position to rein in Kurdistan’s energy sector. The Iraqi federal government could enjoy such legal gains. But it could complicate the political, diplomatic and industrial impasse with Turkey and the KRG unless Baghdad adopts policies properly.
One country, Siastane Energy
Since 2014, Iraq’s energy and industry policy has been divided between the federal government and the Kurdistan Regional Government. Despite the ambiguity surrounding the Iraqi constitution, it calls for shared responsibility between these two governments over the oil and gas sector. However, the Iraqi Council of Representatives has yet to pass a national oil and gas law outlining those rights and responsibilities. In the absence of such a law, politics prevails. While each side created facts based on its interpretation of the constitution, two sets of the country’s energy policies, contract models, international oil companies and buyers ended up.
The Iraqi government has aggressively sought to return the KRG’s energy sector to Baghdad’s control. It has used its political, legal, military and budgetary prowess. In contrast, the KRG resisted these pressures. The short-sighted balance of power and political deals outweighed the most stable and mutually beneficial legislative and economic measures. The country has suffered as a result. Iraq has failed to maximize revenues from oil sales or communicate uniformly with international oil companies or OPEC. It is full control that overshadows transparency and good governance. Unlike its inception, Iraq’s oil federalism—decentralization of oil policy and revenue streams—has not yet become an antidote to the shameful oil plight.
Domestic problems, international repercussions
When a dispute between Kurdish and Iraqi parliamentarians prevented the passage of a national oil and gas law in 2007, the KRG parliament passed its own law. The newly established Ministry of Natural Resources has begun concluding production co-contracts with international oil companies. Because of the lack of capital and technology, the KRG’s contract model conveyed investment risks to companies, but would then reward them generously if they had discovered oil. Such partnerships with foreign companies have been satisfactory to the Kurdish government, which owes its existence and survival to Western support.
However, this was a disgraceful to the Iraqi government, where oil-related nationalism still exists. In the absence of a new oil law, the Iraqi government continued to manage the energy sector on the basis of existing laws dating back to Saddam’s era. Then came the dispute over oil exports. As soon as oil began to flow from the fields of the Kurdistan region, the KRG began looking for an outlet. It signed a long-term agreement with Turkey and established a local pipeline linked to the pipeline between Iraq and Turkey. By May 2014, KRG oil was flowing to international markets through the Ceyhan plant.
Immediately, the Iraqi government sued Ankara at the International Court of Arbitration for allowing the flow of Kurdish oil without Baghdad’s consent. After repeated delays due to the pandemic, the death of arbitrators, and requests by the Turkish government and the Kurdistan Regional Government that Baghdad halt its proceedings, the arbitrators issued a ruling in early 2023. Although details of the ruling have not yet been completed and have not yet been announced, it is expected to benefit Iraq, which has demanded $36 billion in damages. Although Turkey is the defendant in the lawsuit and not the KRG, the latter is expected to be the biggest loser.
The award is the latest example of Baghdad’s pressure campaign against the KRG. When KRG oil exports became imminent, the federal government reduced the KRG’s share of the national budget, causing a financial crisis from which the KRG did not fully recover. Since then, several budget deals have been struck and terminated, according to oil prices and the balance of power between Erbil and Baghdad. For example, after Kurdish Peshmerga forces prevented the Islamic State from advancing, they seized Kirkuk and its oil fields in 2014, and the Iraqi government relied on the KRG pipeline to export Kirkuk oil. However, Baghdad resumed pressure shortly after Iraqi forces regained control of Kirkuk after the KRG independence referendum in 2017.
In addition to political and budgetary pressures, two rulings by Iraq’s Federal Supreme Court have put more pressure on the KRG. In February 2022, the Federal Supreme Court ruled that the KRG’s 2007 natural resources law was unconstitutional and that its oil exports and contracts were illegal. To make matters worse by the financial damage of the Kurdistan Regional Government, the Federal Supreme Court ruled in January 2023 that federal budget transfers to the Kurdistan Region were illegal.
In fact, the Federal Supreme Court restricted the hands of Iraq’s new prime minister, Mohammed Shiaa al-Sudani, and his reconciliation efforts with Erbil. KRG officials pointed to Iran’s influence on the sudden activity of the Federal Supreme Court, especially as it coincided with direct and indirect Iranian attacks on the KRG’s energy infrastructure. Iran rained down rockets on the villa of a Kurdish oil official, while militia rockets landed on the KRG’s main gas fields.
Special goals and landing race to the bottom
The decade-old conflict between Baghdad and Erbil was little more than a losing dynamic for both sides. Baghdad’s pressure and Erbil’s evasive tactics undermine the possibility of connecting their respective energy industries and maximizing revenue for their public coffers. Baghdad had earlier decided to blacklist any company operating in Kurdistan, leading to the fragmentation of Iraq’s energy market.
On the other hand, Erbil was selling its oil at a significant political discount, with an average of $15-18 less than Brent crude in 2022. The KRG lost revenue but did not acquiesce to Baghdad, but ceded to Turkey, international oil companies, and oil traders, burdening its financial resources with billions of debt. Hence, the KRG’s financial conditions are unsustainable even as oil prices rise. In 2022, 60 percent of total oil revenues went to meet the territorial government’s debt. The bloated public sector in the KRG consumes $800 million a month. Such legal disputes and malevolent policies compound existing corruption, increase militia infiltration, and alienate investors.
Despite Iraq’s promises, Exxon and Shell have hesitated about their investment prospects. Iraq continues to buy expensive Iranian gas and energy to make up a third of what it requires while burning half of the natural gas it produces.
Despite the KRG’s emerging energy sector, its goals have been no less damaging. As Baghdad becomes increasingly tight in its dealings with the KRG, Kurdish parties have abandoned Iraqi politics and deepened their ties with Ankara and Western oil traders, where Kurdish influence is significantly more vulnerable. With Turkey’s support, the KRG was able to postpone the ICC’s decision. However, the KRG did not use the time it gained to push for the passage of an appropriate national oil and gas law in Baghdad.
Missed opportunities included the influence Kurdish parties enjoyed after elections and government formations since 2014. That clout has been lost due to conflicts and senior government jobs. Despite questioning the constitutionality and integrity of Iraq’s Federal Supreme Court, KRG parties voted in favor of establishing the Federal Court and have representatives in it.
Although the KRG’s energy industry downgrade has been among Iraq’s few coherent policies across governments, Baghdad has been pressing for an increasingly open door. Internal cohesion was at an all-time low since the Kurdish civil war in the 1990s. The dispute between the Kurdistan Democratic Party and the Patriotic Union of Kurdistan over the management of the energy sector in the Kurdistan region and its revenue flow deepened.
Since the death of PUK leader Jalal Talabani, the balance of power has shifted in favor of the KDP. Nechirvan Barzani, who served as prime minister from 1999 until he became president in 2019, is the architect of the oil and gas sector in the Kurdistan Regional Government. To protect the energy industry from division across Kurdish-style party lines, Nechirvan adopted a conciliatory approach to the most vulnerable PUK.
However, his cousin, Prime Minister Masrour Barzani, appears intent on forcing the PUK to become the junior partner share as he sees fit. The PUK is more vulnerable but remains a source of active unrest. When Prime Minister Barzani offered the prospect of gas in Kurdistan to energy-strapped Europeans in mid-2022, investors did not respond. The bulk of Kurdistan’s natural gas is located in areas controlled by the Patriotic Union of Kurdistan, which Masrour cannot talk about or in the name of the Patriotic Union.
Since October 2022, the PUK team has boycotted meetings of the KRG Council of Ministers. As pressure mounts on the KRG, the PUK may split from the KRG’s unified energy policy from now on and move forward on its own. Late payments and personal contempt have also chronically strained a happy relationship with international oil companies at a time when the KRG desperately needs it, most recently causing the withdrawal of oil-trafigura.
We call on you not to waste the crisis
The unified government of the Kurdistan Region will be the main building block for moving towards (consolidating) an Iraqi energy sector based on solid legal foundations and contributing to Iraq’s energy security and independence. However, Baghdad welcomes the opportunity to deal separately with both the KDP and the PUK rather than with the unified KRG government. This will further delay the passage of much-needed legislation regulating the national energy sector.
Without KRG unity, the Iraqi Council of Representatives could pass an oil and gas law that ignores KRG input. In the past, the two sides have opted for short-term provisions in the annual budget law, but they have been divided due to mistrust.Populism was also devastating.
Ideas and proposals to resolve the dispute between the KRG and Iraq are not lacking. Numerous negotiations have been conducted on contractual and export rights, in addition to advice provided by international agencies. But trust and political will are the weak points. Since the rule of law ensures accountability, the establishment of an appropriate “Federal Supreme Court” in accordance with constitutional requirements must be the first program of work.
Without an agreement between the KRG and the federal government, Iraq is likely to turn its legal victory in the “Arbitral Tribunal” into a political loss. The people in Baghdad yearn for an international victory. But wiser actors know what’s best. Turkey will not hand over billions of dollars in compensation to Iraq, nor will it abandon its lucrative deal with the KRG. Even if Turkey backs down, it will transfer its losses to the “regional government” and demand a more favorable deal for the “regional government” gas.
The devastating earthquake hit Turkey, at a time when its domestic politics are preoccupied with crucial elections scheduled for May. Pressure on the Turkish president, who is in tension, could be diplomatically counterproductive to Iraq. Turkish exports to Iraq reached 13.7 billion US dollars in 2022, and the Sudanese prime minister sees Turkey as Iraq’s gateway to Europe.
If Iraq is further empowered by the necessary legislation for the Federal Supreme Court and oil and gas, it could reach a major deal with Turkey on water flows, border security, and energy exports. In addition, Iraq’s Arab neighbors will monitor Baghdad’s actions, especially as they seek to further link their economies to Iraq’s economy, as in the case of linking to Iraq’s electricity grid. Iraq is reportedly close to connecting its electricity grid to the Gulf Grid, known as the GCC Electricity Interconnection Authority. The Saudi sovereign wealth fund, which has allocated about $10 billion to invest in Iraq, is another example of Gulf investment.
Internal differences between the ruling Kurdish parties and between the Kurdistan Regional Government and the Iraqi government extend to Iraq’s relations with Iran. The Islamic Republic will be angry at the idea of not restricting Iraq’s energy and gas sectors. Iraqi militias with close ties to Iran have targeted international oil companies operating in Iraq and Kurdistan, such as the Basra oil fields and the Kurmur gas field in Kurdistan.
The United States is also monitoring this area. Washington has extended successive exemptions that allow Iraq to import Iranian gas on condition that Baghdad takes steps toward the independence of the energy (sector). However, Iraq remains addicted to (buying) gas and energy from Iran.
Given Europe’s energy shortage caused by Russia’s war in Ukraine, the United States has worked to urge Iraq and the KRG to increase gas production and seek to export it. The KRG has entered into a contract with Russia’s Rosneft to build a gas export pipeline.However, intensifying Russia’s role in the energy sector in the “territorial government” is questionable in the near term.
The dispute calls for mediation between the Kurdistan Regional Government and Baghdad. However, the United States has not played a mediating role since 2008, while the KRG and Baghdad resorted to games of blame rather than resolving the conflict. Although neither side asked Washington to mediate, the U.S. Department of Energy issued a special report on the promise (to provide) gas from the Kurdistan Region to help rationalize these negotiations. On the other hand, oil markets could quickly lose the 400,000 barrels of oil currently exported by the KRG if the crisis is not handled wisely.
Bilal Wahab is a “Wagner Fellow” at The Washington Institute. This article was originally published on the Emirates Policy Center website.
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